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Weekly Pricing Pulse: Commodity prices rise in a calm week for energy markets

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Our Materials Price Index (MPI) increased 0.8% last week, with
six of the ten sub-components rising. The scale of week-to-week
price changes was much smaller than 3.6% average change over the
last four weeks. The lower volatility reflected a comparatively
quiet week in energy, steel, and nonferrous metals markets.

MPI commodity price Materials price index

The MPI’s energy subcomponent increased 1.6% last week, a far
cry from the 9.8% average weekly change in the previous four weeks.
Natural gas markets were the biggest energy mover, posting a 3.6%
increase following two straight weeks of double digit declines.
Lumber prices jumped 3% last week, though prices remain near their
lowest level of 2022 as US homebuilding has cooled. The freight
rate index also saw a noticeable 2% rebound following seven
straight weeks of declines, though the reversal of the downward
trend may be temporary as the iron ore market saw low volume last
week amid soft demand in mainland China. The chemicals subcomponent
stood out on the downside, posting a 1.8% weekly decline. A 4.4%
drop in Asian ethylene prices pulled the sub index lower as
concerns over global growth and specifically demand in mainland
China weigh on the chemicals market. The weakness in chemicals —
the subcomponent is down 21% y/y — is eye-opening given that
energy products, major inputs in chemicals production, are 95%
higher y/y as measured by the MPI’s energy index.

Materials price index

Although the MPI notched an increase last week, there are clear
signs of softening demand. Central banks around the world are
aggressively tightening financial markets to reign in demand and
thus tame inflation. Seven central banks will hold meetings this
week, with most expected to raise interest rates again, including
the US Federal Reserve and the Bank of England. Although commodity
prices have been moving lower since March, they remain high.
Moreover, the chance of energy shortages in Europe this winter
presents significant upside price risk for energy-intensive
commodities, including metals and chemicals. Notwithstanding these
concerns, a softening macroeconomic outlook leads us to continue to
project lower inflation over the next year.

Materials price index softening demand




Posted 21 September 2022 by Thomas McCartin, Senior Economist, Pricing & Purchasing, S&P Global Market Intelligence


This article was published by S&P Global Market Intelligence and not by S&P Global Ratings, which is a separately managed division of S&P Global.

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